and fill precisely the place of the values of which they are the mortgage, it is useless to redeem them and to collect for that purpose from the individual members of the nation values which would have been productive in their hands, and which in the hands of the creditors of the state, produce only what the claim which they extinguish would have produced?

Could national debts keep their value without the aid of a sinking fund, the accumulation of such a fund might undoubtedly prove detrimental to public and private wealth; for, however advantageous a capital placed at compound interest may appear, it only extinguishes a debt which costs six per cent., while the capital applied to this extinction, if it had been left in the hands of the husbandman, the manufacturer and merchant, would have produced at least ten or twelve per cent. A sinking fund would therefore be a real loss to public and private wealth, if it could be dispensed with.

But can a public debt keep its full value without a sinking fund, particularly when it forms a fifth of the circulating capital of a country? This is a problem which experience has long ago solved. Let the debt of those nations that neglected to prop it by a sinking fund be compared with the debt of those countries which devoted a sinking fund to it; and it will easily be seen, that national debts have only ceased to be injurious, since they have been supported by a sinking fund; that to this fund they are indebted for the solidity and stability which are their safeguard, and which have entitled them to be the thermometer and regulator of all other values.

Thus, in whatever way Lord Lauderdale's criticism of the sinking fund be viewed, it appears to rest on erroneous notions, contrary to the true principles and essence of a sinking fund.

Finally, it has been observed by Adam Smith, that "the practice of funding has gradually enfeebled every state which has adopted it; and he adduces as instances Genoa and Venice, which seem to have begun it; Spain, which seems to have learned the practice from the Italian republics; and France, the United Provinces, and England, which followed the example."*

I may at least be allowed to doubt both the decline of most of these nations and the cause to which this decline is ascribed by Adam Smith. Were it necessary, it would be easy to prove that the wealth of these nations grew progressively with the system of public loans, particularly since it has been perfected by a sinking fund; and indeed it could not be otherwise. A nation cannot borrow, unless it is growing rich; its loans cease as soon as it gets poor. It is therefore unreasonable to impute the decline of a nation and the decay of its power to the system of public loans. The causes of their fall must be sought for in other circumstances; and were it either useful or proper to point out those which may have contributed to the decline of Genoa, Venice, Spain, and the United Provinces, they would be discovered in the ruinous wars which these states maintained, for such a length

Adam Smith's Wealth of Nations; London, 1805; vol. in. book v. chap. 3, page 450.

of time, against more powerful nations. The system of public loans, far from aggravating the distress of their situation, enabled them, on the contrary, to oppose a protracted and courageous resistance, while every other means would have hastened the decay and ruin of their power. As for France, and England in particular, if their prosperity has been maintained, if it has made immense progress in spite of the calamitous wars to which they have been a prey, they are indebted for this advantage to the system of public loans, the least distressing, I had almost said, the most advantageous way of providing for the incalculable wants of war.

Thus every thing concurs to demonstrate, that even under a supposition the most unfavourable to public loans, when they abstract capitals from productive labour to make it serve to an unproductive consumption, they are still preferable to excessive taxes which impair every capital and exhaust the powers of labour.

If, from the formation of capitals and their employment in divers branches of labour and public loans, we pass to their influence upon wealth, new considerations crowd in the mind, the science expands its views, and is enriched with new results,

CHAP. IV.

Of the influence of Capitals on the progress of
Public Wealth.

DR. Quesnay and Adam Smith are perfectly agreed about the importance of capitals and their share in the progress and growth of wealth.

The former teaches, that "the prosperity of an agricultural country consists in great advances to perpetuate and augment the national revenue and taxes."*

Adam Smith says, that "the previous accumulation of capital stock is necessary to the great developement of the productiveness of labour; that it necessarily precedes the division of labour; that the progressive subdivision of labour itself is in proportion to the previous augmentation of the capital stock which has been gradually accumulated; and that industry increases in proportion to the accumulation of capital stock, which puts it into motion."†

But while they acknowledge the powerful influence of capital, both authors think this influence is not equal in every employment of capital, or that all modes of employing capital are not equally beneficial to the wealth of the nation by which it is employed.

+ Adam Smith's Wealth of Nations, vol. i. Introduction.

Constantly prepossessed in favour of the agricultural system, Dr. Quesnay considers the employment of capital useful only as far as it is applied to agriculture.

Adam Smith admits likewise, that "the quantity of productive labour which equal capitals are capable of putting into motion, varies extremely according to the diversity of their employment; as does likewise the value which that employment adds to the annual produce of the land and labour."*

We recognize in these two theories the difference of the systems adopted by these two authors; it is a restatement of their opinion respecting the sources of wealth and the nature of labour. I shall not go over this ground again, nor shall I endeavour to prove that what I have stated with regard to labour applies alike to the capital stock which puts it into motion and of which it is but, as it were, the agent and tool; it would betray me into useless and tedious repetitions.

But independently of the opposition which prevails, and must prevail, between these two authors, Adam Smith has set up a particular doctrine to determine the degrees of utility of capital employed in the dif ferent ramifications of productive labour. This doctrine is too important to pass it over in silence; it behoves us to examine and appreciate it if posible.

Adam Smith asserts, that "capitals of equal value will put into motion very different quantities of productive

Adam Smith's Wealth of Nations; London, 1805: vol. ii. book ii. chap. 5, pages 48, 49.